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Rio Grande LNG loses key financial backer

France’s Société Générale pulled out of Rio Grande LNG. The project in south Texas still intends to move forward, but financial headwinds have recently increased.

Societe Generale signage next to the entrance to their office on Park Avenue in Manhattan (Photo credit: Adobe Stock/Roman Tiraspolsky)

French bank Société Générale withdrew its support for the controversial Rio Grande LNG project slated for Brownsville, Texas, following years of pressure from local activists.

As Gas Outlook reported, the proposed Rio Grande LNG project would industrialize an area rich in wildlife, posing threats to an ecologically unique area of the Gulf Coast. The south Texas coast, unlike much of the rest of the state’s coastline, does not have a heavy oil, gas, and petrochemical presence.

Rio Grande LNG has also promised to deploy carbon capture and sequestration, something critics say is expensive and unworkable.

Activists, tribes, and community organizations in Brownsville have spent years pressuring major financial institutions to pull their support from the project. They have travelled to the UK and Europe to meet with major financial institutions, including Société Generale, as well as Barclays and Credit Suisse. In recent years, some banks, such as BNP Paribas and La Banque Postale, severed their ties.

At least three main banks were thought to remain — Société Generale, Credit Suisse, and Australia’s Macquarie.

But in recent days, news broke that Société Generale backed out in the first quarter of 2022.

Opponents celebrated the news. “Years and years of facing these banks and demanding that they step off our sacred lands and sacred sites have led us to these great victories. French bank BNP Paribas stopped its support for Texas LNG in 2017, and Société Générale has finally withdrawn from Rio Grande LNG,” said Juan Mancias, chairman of the Carrizo Comecrudo Tribe of Texas, said in a statement. “But we won’t back down. Rio Grande LNG has been bulldozing our sacred lands.”

NextDecade issued a statement, clarifying its financial situation. It confirmed its loss of Société Generale last year, but noted that it retained Macquarie and Japan’s MUFG Bank as financial advisors.

The news also comes a few weeks after NextDecade delayed its expected final investment decision yet again, pushing it back until the end of the second quarter. Previously, the company signaled it would give the greenlight on the project by the end of the first quarter of this year.

Rising interest rates and turmoil in the global banking sector could be adding financial headwinds to the project.

Inflation means “LNG exporters need to recover their costs via higher liquefaction fees, which is a harder sell now with gas prices collapsing,” Stephen Ellis, an energy strategist at Morningstar Research Services LLC, told Reuters.

Société Generale’s exit should be a signal to others, activists say. “Today’s victory is seven years in the making,” Rebekah Hinojosa, a Brownsville resident and campaign representative with the Sierra Club, said in a statement. “Société Générale’s withdrawal from Rio Grande LNG is a warning to all other major banks: Stop supporting fracking and LNG.”

NextDecade has inked long-term purchase agreements for Rio Grande LNG with potential customers that include U.S. major ExxonMobil, Japan’s Itochu Corp and China Gas Holdings.